Input Tax Credit on Reverse Charge

What is input tax?

Input tax in relation to a taxable person, means the (IGST and CGST) in respect of CGST Act and (IGST and SGST) in respect of SGST Act, Charged to him on any supply of goods and/or services which are used, or are intended to be used, in the course or furtherance of his business. Under the IGST Act, input tax is defined as IGST, CGST or SGST charged on any supply of goods and / or services.

Can GST paid on reverse charge be considered as input tax?

Yes. The credit can be availed if such goods and/or services are used, or are intended to be used, in the course or furtherance of his business.

Yes. It may be noted that credit of tax paid on capital goods also is permitted to be availed in one installment.

What is the ITC entitlement of a person who has applied for registration under the Act within thirty days from the date on which he becomes liable to registration and has been granted such registration?

He shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act. It may be noted that the credit on pre-registration stock would not be admissible if the registration has not been obtained within a period of 30 days from the date on which he becomes liable to registration.

What is the eligibility of input tax credit on inputs in stock for a person who obtains voluntary registration?

As per section 16(2A) of MGL, the person who obtains voluntary registration is entitled to take the input tax credit of input tax on inputs in stock, inputs in semi finished goods and finished goods in stock, held on the day immediately preceding the date of registration.

Where goods and/or services received by a taxable person are used for effecting both taxable and non-taxable supplies, whether the input tax credit is available to the registered taxable person?

The input tax credit of goods and / or service attributable to only taxable supplies can be taken by registered taxable person. It is important to note that credit on capital goods also would now be permitted on proportionate basis.

What would be input tax eligibility in case where the goods and/or services supplied by a registered taxable person become absolutely exempt?

The registered taxable person who supplies goods and / or services which become absolutely exempt, has to pay an amount equivalent to the input tax credit in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of such exemption. It has also been provided that after payment of the amount on such goods, the balance, if any available in electronic credit ledger would lapse.

A dealer paying tax on composition basis crosses the composition threshold and becomes a regular taxable person. Can he avail ITC and if so from what date?

He can avail ITC in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax.

Whether the principal is eligible to avail input tax credit of inputs sent to job worker for job work?

Yes, the principal is eligible to avail the input tax credit on inputs sent to job worker for job work.

What is the time period within which the inputs sent for job work has to be received back by the principal?

180 days.

Whether principal has to reverse the input tax credit on inputs which have not been received back from the job worker within 180 days?

Yes, the principal has to reverse the credit along with interest on inputs which have not been received back from job worker within 180 days but he can reclaim the credit on receipt of inputs.

What is the time period within which the capital goods sent for job work has to be received back by the principal?

Two years.

What is the liability of the principal if the capital goods sent to job worker have not been received within 2 years from the date of being sent?

Principal has to pay an amount equal to credit taken on such capital goods along with interest. But he can reclaim the credit on receipt of inputs.

Where the registered taxable person has claimed depreciation on the tax component of the cost of capital goods under the provisions of the Income Tax Act, 1961, will ITC be allowed in such cases?

The input tax credit shall not be allowed on the said tax component.

What are the conditions necessary for obtaining ITC?

Following four conditions are stipulated:

(a) The registered taxable person should be in possession of taxpaying document issued by a supplier;

(b) The taxable person must have received the goods and / or services;

(c) The tax charged on such supply has been actually paid to the government either in cash or through utilization of input tax credit; and